The Gujarat government has refused to extend the tax incentives offered to the Nano car to Tata Motors’ other models that will be manufactured from the Sanand Nano factory near Ahmedabad.
“The incentives offered when the project was shifted from West Bengal to Gujarat were only meant for the Nano car, so they cannot be extended for other models,” said a top official in the State government.
The Tata group had strongly demanded that the tax incentives be extended to other models that may be produced from the factory.
Top officials of the Tata group, including Cyrus Mistry, had reportedly had a series of meetings with the key officials of Gujarat government in 2013 and 2014 in which they had demanded a same set of incentives for other models the Tata Motors officials were contemplating to produce.
“Our stand was that if they want to produce other cars in the same factory, they can sign a separate concession agreement and the state would be willing to provide incentives it offered to Suzuki and Ford but they cannot be same as Nano’s” another official who was involved in the negotiations with the TML officials told The Hindu .
Unprecedented tax incentives in 2008 In 2008, when Ratan Tata decided to relocate the Nano project from West Bengal to Gujarat owing to disputes related to land acquisition, the then Gujarat government headed by Chief Minister Narendra Modi, now Prime Minister, had offered unprecedented amount of tax incentives and other benefits.
As per the Government Resolution (GR) issued by the State government, the state had offered a Rs. 9670 crore soft loan in the form of VAT exemptions at the interest rate of 0.1 per cent to be payable after 25 years, which meant Tata was not required to pay any VAT for Nano cars for 25 years.
Other benefits the Gujarat government had given for its prized project included exemptions from registration charges, stamp duty, electricity duty and other local taxes, and infrastructure worth Rs. 200 crore that included approach roads, power stations, drainage lines, treatment plants, gas connections and water supply.
“Nano a loss-making entity” In his five page email to the members of Tata Sons after he was summarily sacked as chairman, Cyrus Mistry had mentioned that the Nano was a loss-making entity and needed to be shut down but “Emotional reasons alone have kept us away from this crucial decision.”
He claimed that the product had consistently lost money, peaking at Rs. 1000 crore and there was no line of sight to profitability for Nano.
“Since Nano had already flopped, Mistry, during his meetings with the officials insisted that other models can be manufactured at Nano factory provided the incentives remained the same but that was no acceptable to us,” the official involved in negotiation added.
The factory spread in 1100 acres land in Sanand, 40 km from Ahmedabad, went into operation in 2010 with capacity of manufacturing 2.5 lakh units per year but as per the figures provided in the state assembly, it has so far manufacuted only 32561 units in 2014 and 2015.
